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No-par vs Par Stock [Video]

No-par vs Par Stock

Some companies issue stock that has a par value while other companies issue no-par stock. In both cases, total assets and total stockholders’ equity increase as a result of the stock issuance. However, there is a difference in the accounts that are credited based on whether the stock has a par value.

For example, let’s say a company issues 5,000 common shares with a par value of $2/share and a market value of $40/share. The company would debit the cash account for $200,000 ($40/share * 5,000 shares). In addition, the company would credit the common stock account for $10,000 ($2/share * 5,000 shares) and credit the additional paid-in capital account for $190,000 ($38/share * 5,000 shares).

If the company had instead issued the 5,000 common shares as no-par stock with a market value of $40/share, the company would debit the cash account for $200,000 and credit the common stock account for $200,000 (the additional paid-in capital account is not affected by no-par stock).
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